Wix.com Ltd. Q2 FY2026 earnings call

Strategic Direction

• Wix is pursuing a two-pronged AI strategy to capture demand across evolving market trends: Wix Harmony for self-creators using drag-and-drop creation paired with AI, and Base44 for natural language vibe-coded app and software creation.
• The company prioritizes in-house development of proprietary LLMs to gain tighter control over output quality, enable faster iteration, achieve a better long-term cost structure, and build a proprietary compounding data asset that does not benefit external AI vendors.

Product Milestones

• Launched Base1, Base44's proprietary in-house large language model, achieving a major company-wide 2026 strategic milestone for reducing AI inference costs.
• This launch follows the earlier 2026 introduction of Wix Harmony's purpose-built in-house LLM, leveraging Wix's 20 years of accumulated data science research, infrastructure, and experimentation capabilities to bring Base1 to production quickly.

Operational Updates

• Completed organizational realignment in Q2 2026, winding down low-monetization subsidiary InkFrog to refocus resources on high-return AI products, improving overall GPV monetization mix.
• Base44's gross margin has improved dramatically from near 0% at the start of 2026, with the shift to Base1 inference driving margin expansion to ~60% projected for H2 2026.
• Wix sees increasing adoption of annual plans for Base44 as user trust in the platform for production software needs grows, with monthly retention metrics improving sequentially each quarter.
• The company will reinvest all 200bps of consolidated non-GAAP gross margin improvement from Base1 cost savings into additional Base44 sales and marketing to capture market share.

1. Core Self Creators (Wix Harmony): Revenue grew 14% year-over-year in Q2, accelerating sequentially from prior quarters. This segment represents Wix's established core business for self-service website creation, with stable year-over-year margins and continued steady growth. No explicit absolute revenue or contribution percentage was provided in the call.
2. Base44: This AI-powered natural language/vibe-coded creation segment delivered strong above-expectation growth in Q2, with elevated top-of-funnel demand (new cohorts outperforming prior cohorts) and renewal activity driving overall growth. Non-GAAP gross margin for Base44 improved from near 0% at the start of 2026 to a projected ~60% in H2 2026 following the launch of the in-house Base1 LLM.
3. Partner Segment: Base44 saw a step-up in contribution to the partner segment in Q2, as professional partners increasingly adopt AI tools for client workflows. Overall GPV grew 3% year-over-year, with the wind-down of low-monetization subsidiary InkFrog improving the segment's take rate by shifting mix toward higher-monetization offerings. No explicit absolute revenue or contribution percentage was provided.

• Full-year 2026 guidance is maintained: revenue is projected to grow 12-16% (low to mid-teens) year-over-year, with bookings growth expected to come in a few points below revenue growth at low-teens percentage.
• Third quarter 2026 revenue is expected to grow at a low double-digit percentage year-over-year, with Q4 2026 growth projected to be roughly equal to Q3 growth, no acceleration expected between the two quarters.
• Full-year 2026 non-GAAP free cash flow margin (excluding acquisition and restructuring costs) is maintained at high-teens percentage.
• Consolidated non-GAAP gross margin is expected to improve by approximately 2 percentage points in H2 2026 compared to H1 2026, entirely driven by AI inference cost reductions from in-house LLMs.
• Wix moderately raised its target TROI (time to return on marketing investment) for Base44, reflecting management's confidence in the large market opportunity and the decision to accelerate market share capture.

• It is still early in the adoption of Base44 by partner/agency users, and the long-term trajectory of partner migration from core Wix offerings to Base44 cannot yet be accurately predicted, creating uncertainty around future revenue mix and lifetime value.
• The first full cohort of annual Base44 subscribers have not yet reached their first renewal date, so there is no available data on long-term Base44 renewal rates to confirm durable ARR growth.
• The AI-powered app creation market is new and rapidly evolving, with unproven long-term competitive dynamics that make future market share and adoption trajectory hard to forecast.
• A strengthening Israeli shekel creates FX headwinds that offset expected R&D cost savings from 2026 organizational realignment.

Q: What quality tradeoffs exist for the in-house Base1 LLM, and what is the potential for further AI compute cost improvements? / A: Base1 is custom-trained in-house specifically for Base44's code generation use case, and is continuously refined using user interaction data to improve output selection. Management states Base1 already delivers better results for Base44 than third-party frontier models, while also dramatically reducing inference costs. The continuous improvement cycle will support ongoing quality and cost enhancements over the long term.

Q: What is the current status of Base1 deployment for Base44 traffic, and what are the key drivers of elevated Base44 demand? / A: A significant share of Base44 traffic is already running on non-frontier in-house models, with the company still testing the optimal mix of models for different use cases. The largest demand driver is word-of-mouth from satisfied users who successfully build applications on Base44, followed by direct marketing. Approximately 40% of Base44 users build personal projects, while 60% build business-oriented applications, with a higher share of large business users on Base44 than on core Wix.

Q: How does the TROI framework for Base44 investment work, and what is the upside for further extension of the TROI target? / A: TROI is a disciplined framework that sets the cadence of marketing investment based on expected payback timeline and risk profile. Management notes there is no current plan to further extend the TROI target after the recent moderate increase. If Base44 gross margin improves further or annual subscription adoption increases (which speeds up payback), the target could be adjusted, but changes will always follow a clear, data-driven formula.

Q: How does Wix's Base1 improvement trajectory align with the broader open source AI ecosystem, and what is Wix's competitive position versus frontier model providers? / A: Base1 will benefit from broader open source AI development, but most quality improvements for Wix's use case will come from custom fine-tuning for non-professional user prompting, not from general frontier model intelligence gains. Better Base1 quality directly improves Base44 conversion and retention, which management has measured consistently over the past year. While frontier models will continue to innovate, current models are already capable enough for most user application building needs, and competitive moats around general frontier models are currently not very large.